Traders have turned cautious about the US dollar in early trading on Tuesday as markets wait to hear Fed Chairman Jerome Powell’s comments at his testimony followed by consumer prices data later in the week for possible clues on a timeline for the first post-pandemic rate hike. At the time of writing, the US dollar index DXY is trading around 95.86.

Powell is due to testify before a Senate committee following his re-nomination as the Fed chair. In his opening remarks released in the previous session, he touched upon his commitment to counter the high inflation persisting in the US economy over the past several months, although no further information on his exact plan was revealed.

In addition to his testimony, traders are likely to pay close attention to questions asked by senators regarding his bid for a second term. His responses could offer considerable volatility for the US dollar and move forex markets later in the day.

The greenback has been trading mostly rangebound after touching the highest levels seen in 16 months in late November 2020. Expectations of a faster rate hike by the Fed and fears about the Omicron variant’s economic impact have kept the reserve currency well bid but after last week’s NFP report, traders have adopted a more cautious mood towards it.

Analysts expect any clues for the Fed to hike interest rates in March and implement QT measures to lend further support to the US dollar in the coming sessions. For now, money markets are pricing in the first rate hike by May after which the Fed could announce two more rate hikes before the end of 2022.